Daniel Kahneman, Jewish American, psychologist, born in 1954, won the Nobel Prize in Economics in 2002. His research method is to combine psychology and economics to study how people will make decisions in the face of uncertainty. Classical economic theory has two foundations based on sediment: one is the assumption of rational economic man; the other is the assumption of a perfectly competitive market. These two assumptions determine that people will only respond to external stimuli. However, psychological research shows that people only make decisions based on their own judgments about the outside world. Kahneman found that in most cases, decision makers are faced with uncertain situations, and the final decisions are always systematically deviated from the predictions of classical economic theory. Kahneman finally explained and proved this a little.
Kahneman's First Law: The Law of Small Numbers. When people face uncertainty, they are more inclined to observe small samples to draw judgments. For example, when buying lottery tickets, many people like to study the number patterns for a month or two. They don’t know that there are millions of combinations in a big lottery. If one issue is released every day, it is enough for him to study for two hundred years. , but they very much believe that the two-month number rule can predict enough number combinations for two hundred years. Another example is playing in a casino. Gamblers can make a decision based on the historical records of the beatings on the screen, often observing a few dozen or at most dozens of records. Also, when doing trading, many people will look back at the historical data of half a month and up to several months to judge the stability of their trading signals, completely ignoring that there are still decades of market conditions there. The principle of the law of decimals is that when people face uncertainty, they are more willing to believe in the part of the information that they can access or understand, or blindly believe in the subjective understanding of the law of probability. It can be concluded from this that human judgment comes from comparison rather than rational analysis.
Kahneman's Second Law: The Expectation Theorem. For gains and losses of the same size, we place more weight on gains. In history, Maurice Ales conducted an experiment, designing a gamble for 100 people: Gamble A has a 100% chance of getting 1 million yuan, gamble B has a 10% chance of getting 5 million yuan, and an 89% chance of getting 1 million yuan. Yuan, 1% chance of getting nothing. The result is that the vast majority of people choose A over B. For human beings, the mathematical expectation value of A is 1 million, but its utility value is greater than that of B whose mathematical expectation value is 1.39 million, that is, most people choose A. Continue to test, game C, 11% chance to get 1 million yuan, 89% chance to get nothing, game D, 10% chance to get 5 million yuan, 90% chance to get nothing. Result: Most people choose D. That is, the expected value of game C (110,000 yuan) is less than the expected value of game D (500,000 yuan), and the utility value of C is also smaller than that of D. The first experiment, the probability that anyone can find a profit is greater, people are just comparing between 100% and 89%, the second experiment, the probability that anyone can find nothing is greater, People are comparing between getting five million and one million. Kahneman explained this. When human beings make decisions in the face of uncertainty, purely rational mathematical expectations are not their reference. People only rely on predictable results. That is to say, people only care about Potential gain and aversion to any possible loss.
Kahneman's third law: the law of expectation (also called the law of risk), that is, the irrational psychological factors that ordinary people always avoid risks as much as possible when faced with gains, and like to take risks when faced with losses . Kahneman found that most investors are not standard financial investors but behavioral investors. Their behavior is not always rational, and they are not always risk-averse. This makes them willing to take greater risks in the hope of recovering losses. When profits appear on the books, they who are afraid of losing tend to take the remaining profits to avoid possible risks. This kind of behavior comes from two summaries of human behavior: first, happiness is a subjective feeling, and people’s happiness is related to the reference of comparison. No matter how much profit is compared with loss, people are happy; Pain is far greater than the joy of gaining the same benefits. Compared with the happiness of gain, loss will cause greater pain.
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